💾🎮 Microsoft: Deep Dive Company Analysis
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Microsoft Explained (Financials as of May 2023)
Microsoft is an American multinational technology company headquartered in Redmond, Washington which develops, licenses, and sells computer software, consumer electronics, and personal computers. Microsoft has grown to one of the largest and most influential companies in the world, with a market capitalization of over $2.35 trillion USD as of May 2023.
History
Microsoft was founded by Bill Gates and Paul Allen in 1975 with the aim of developing software for personal computers. The duo famously created the company with the goal of “a computer on every desk.” Remember, at the time, personal computers were unheard of as they were too large or far too expensive for everyday consumers. The company's first major success came in 1980 when it signed a deal with IBM to provide the operating system for its personal computer. This operating system became the dominant operating system in the 1980s, rapidly putting Microsoft on the map. In 1985, Microsoft released Windows, a more visual operating system than what was on the market, making it easier for non-technical users to use computers. Windows became the dominant operating system for personal computers in the 1990s and remains so today with its Windows 11.
Pictured: Co-Founders of Microsoft Paul Allen (left), Bill Gates (right)
Source: Microsoft Blog
Revenue Sources and Key Costs
Microsoft is organized into four main business segments:
Business & Productivity Solutions
Products and services that help people and organizations increase productivity, including Office 365 (a cloud-based subscription service that includes Microsoft Word, Excel, PowerPoint, and other tools), LinkedIn (a social network for professionals), and Dynamics 365 (a cloud-based enterprise resource planning and customer relationship management solution).
Intelligent Cloud
Products and services that help customers build, deploy, and manage intelligent applications and infrastructure in the cloud, including Azure (a cloud computing platform), server products (such as Windows Server and SQL Server), and enterprise services (such as Premier Support Services and Microsoft Consulting Services).
General Computing
Products and services that help people and organizations use and interact with personal computers, including Windows, Surface (a line of personal computers and tablets), and search advertising.
Gaming
Includes well-known brands like Xbox. Microsoft has been expanding into the game development space with the acquisition of Bethesda Studios and the proposed acquisition of Activision Blizzard.
The company had a very strong 2022 fiscal year, with revenue of $198.3B, which increased by 18% or $30.2B from the previous year.
The company’s main costs are manufacturing and distributing products, research and development (R&D) of its products, and sales and marketing. To maintain its superiority, Microsoft needs to continue developing its products, publicize the great software they have designed, and convince consumers and businesses to utilize it.
Costs of Goods Sold: $62.7bn (32% of revenue)
Research and Development: $24.5bn (12% of revenue)
Sales and Marketing: $21.8bn (11% of revenue)
Valuation
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